SDG&E's request to recover 2007 fire costs denied

State utility regulators have rebuffed a request by SDG&E to recover uninsured 2007 wildfire costs from utility customers through a streamlined review process, but the utility can still seek recovery through separate proceedings.

In separate recommendations issued Monday night, two officials overseeing the case said SDG&E should apply to recover uninsured wildfire costs expected to exceed $600 million through an existing application process tailored to catastrophic events.

At stake in the proceedings before the California Public Utilities Commission is who ultimately pays for devastating fires — ratepayers or investors — that were triggered in large part by SDG&E power lines.

SDG&E was not available for comment but has said repeatedly that it would seek recovery of wildfire costs from ratepayers through other regulatory means if its request for a wildfire expense balancing account were rejected.

In one opinion, an administrative law judge at the California Public Utilities Commission recommended rejecting the SDG&E application, arguing that it would thrust unlimited liability for damages onto utility customers while undermining incentives to reduce wildfire risks.

California Public Utilities Commissioner Timothy Simon broke with that recommendation, favoring the use of specialized wildfire accounts to mitigate insurance shortfalls but finding that SDG&E was not authorized to recoup costs after the fact.

Either draft recommendation could be adopted, amended or modified before a final vote by the five-member utilities commission based in San Francisco. The commission also could call for a meeting to discuss the matter before that vote.

The three catastrophic wildfires in October 2007 destroyed more than 1,300 homes and killed two people in northern San Diego County.

With the utility’s fire insurance and largest counterclaims exhausted, the final costs of the fire are coming due as hundreds of court claims continued to be settled this year.

Two state investigations found that SDG&E lines, and to a lesser degree Cox Communications equipment, caused the fires, which spread quickly under dry conditions and gusting Santa Ana winds. San Diego Gas & Electric denies it was ever at fault, but apologized previously for obstructing investigators looking into the root causes.

In 2009, SDG&E agreed to pay $14.4 million to the state’s general fund to settle accusations that shoddy maintenance led to the blazes.

Administrative Law Judge Maribeth Bushey said Monday that SDG&E’s request for a streamlined cost recovery process failed to address key safety and liability issues, echoing the objections of consumer advocates and utility customers.

“Ratepayers remain subject to limitless potential liability for uninsured damages to third parties,” she wrote. “No financial or operational incentives for management to reduce the risk of wildfires have been proposed.”